SEBI includes Mutual Fund Units under Insider Trading norms

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insider trading norms

Notification No. SEBI/LAD-NRO/GN/2022/108, Dated 24.11.2022

The SEBI has notified the SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2022, whereby it has introduced Chapter IIA to the SEBI (PIT) Regulations, 2015. Chapter IIA prescribes restrictions on communication concerning and trading by insiders in the units of mutual funds. Now, an insider cannot trade in the units of a scheme of a mutual fund when in possession of unpublished price-sensitive information, which may have a material impact on the net asset value of a scheme or may have a material impact on the interest of the unit holders of the scheme.

The dealings of a person in the units of a mutual fund when in possession of unpublished price-sensitive information shall be presumed to have been motivated by the knowledge and awareness of such information in his possession.

Amended norms require an asset management company to disclose every quarter w.r.t. the details of holdings in the units of its mutual fund schemes, on an aggregated basis, held by the Designated Persons of an asset management company, trustees and their immediate relatives.

Further, the SEBI has directed the board of directors of every asset management company to ensure that the CEO or MD shall formulate a code of conduct with their approval to regulate, monitor and report dealings in mutual fund units by the Designated Persons and immediate relatives of the Designated Persons towards achieving compliance with these regulations.

SEBI has also introduced the Institutional Mechanism for the Prevention of Insider trading. This shall put in place an adequate and effective system of internal controls to ensure compliance with the requirements given in these regulations to prevent insider trading.

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